What do new ‘Buy Now, Pay Later’ rules Mean for You?

Millions of shoppers across the UK will benefit from stronger protections as new “buy now, pay later” rules come into effect on July 15.

The government said the changes fulfil its commitment to end the BNPL “wild west” by bringing the fast-growing form of credit under the regulation of the Financial Conduct Authority (FCA).

The reforms introduce affordability checks, clearer information for consumers and new rights to make complaints, while offering protections similar to those available with credit cards and personal loans.

BNPL allows shoppers to spread the cost of purchases over several instalments, often without paying interest if repayments are made on time.

It is widely available for products and services including clothing, electronics, flights, hotels and takeaway food.

The sector has expanded rapidly in recent years.

According to the FCA, its value increased from £60 million in 2017 to more than £13 billion in 2024.

The popularity of BNPL has also continued to grow. Data from UK Finance shows usage rose from 14% to 25% of UK adults within a year. While younger consumers initially drove its rise, recent growth has been strongest among older age groups.

However, regulators and consumer organisations have repeatedly warned that some shoppers risk borrowing more than they can afford, potentially leading to debt, late fees and damage to their credit scores.

Before the changes, BNPL products were not regulated in the same way as other forms of consumer credit.

Under the new rules, lenders must carry out affordability checks before approving each loan.

Although many providers say they already perform these assessments, the government said the requirement will help ensure consumers do not take on repayments they cannot realistically afford.

Providers must also give customers clear information before they borrow, including payment schedules and the consequences of missing repayments.

People experiencing financial difficulties should now be directed towards debt advice and support before being referred to debt collectors.

The changes also introduce Section 75 protection for buy now, pay later purchases worth between £100 and £30,000.

This allows consumers to claim against both the retailer and the BNPL provider if something goes wrong with a qualifying purchase.

Many BNPL transactions are below £100, with credit reference agency Experian estimating the average purchase is around £60.

Some providers, including Klarna, will continue offering their own buyer protection for lower-value purchases.

Consumers will also be able to take complaints about issues such as mis-sold BNPL products or incorrect credit file entries to the independent Financial Ombudsman Service.

Despite the additional safeguards, some organisations have warned the regulations could make it harder for certain consumers to access BNPL.

Fair4All Finance has claimed that up to 30% of current users could be rejected under the new affordability checks, despite many having never missed a repayment.

Its chief executive, Kate Pender, said:

“There’s a real risk that many people who currently use BNPL responsibly could be unfairly excluded.”

She added that some consumers could instead turn to alternatives, including illegal moneylenders.

Industry experts also believe the regulations could reshape the BNPL market.

Ben Player, a partner at law firm TLT, said larger providers and firms already authorised by the FCA would be better placed to manage the additional compliance requirements, while smaller companies may struggle with the increased costs and complexity, “prompting consolidation… or even exits”.

Others believe regulation could encourage further growth by increasing confidence among retailers and consumers who had been waiting for greater oversight of the sector.